Persistent Challenges and New Opportunities for Childcare
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SUCHI SAXENA: All right. I mean, wow, wow, wow, what a panel. That was an amazing discussion. And if you want to learn more about Cedar Valley Kids in Iowa or the Michigan Tri-Share program or IFF, please check out our spotlight on childcare and the labor market, because we have articles there written by folks at the Chicago Fed. We'll add a link to the Carole Robertson Center also to our site, so folks can easily check them out as well.
My name is Suchi Saxena. I'm a vice president here at the Chicago Fed, and it's my sincere pleasure to be moderating this final panel on persistent challenges and new opportunities for childcare and the labor market. And I'm really excited to welcome our three panelists here.
The earlier panel, we had the great pleasure-- and it's kind of the reason we do this work is to hear from folks on the ground who are working hard to solve very specific challenges in their local communities. And now we're going to talk to folks who are working just one step above that, at the systems level, working across sectors, across research and practice, to create conditions on the ground to really support this work.
So I'm really excited to introduce-- and we're going to go geographically West to East in our introductions-- Rob Grunewald, who's an economist, and he is the principal of Rob Grunewald Consulting, LLC. So excitingly, Rob is based in Northwest Wisconsin, but he started his career out at the Minneapolis Fed, and was there for quite a long time until hanging up his own shingle. So thank you, Rob, for coming all the way from Northwest Wisconsin.
Next to Rob is Seung Kim, who is the Senior Vice President of National Programs at the Local Initiatives Support Corporation. And Seung brings a perspective on the business side, really, of the childcare work. And so we're really excited to hear about more of what you all are doing.
And then finally, at the end, coming in from Kalamazoo, Michigan, is Joan Blo-- Blough-- sorry. She's a Senior Director of the Child Care Innovation Fund at the Early Childhood Investment Corporation in Michigan. And Joan is doing quite a bit of innovative work across the state of Michigan at the policy level. So we're just really excited to hear from you all.
So you each come to this work from really different places as innovators, as program creators, as researchers. So can you just talk to us a little bit about what are those conditions you're trying to help create on the ground, to help this work begin and scale and really flourish. What are the communities that you're thinking about, the solutions you're trying to create?
ROB GRUNEWALD: Sure. So I'll begin with to say I got involved with this issue back in 2002 when Art Rolnick, who was our Director of Research at the time at the Federal Reserve Bank of Minneapolis, invited me to write a paper with him about the economic benefits of investing in children. And so we released our paper the next year. It's called "Early Childhood Development-- Economic Development with a High Public Return."
And in the paper, we argued that the next dollar spent on economic development would achieve the highest return if we spent that on the development of young children. And we had all the data that was available there to look at long-term studies and to be able to assess what that return on investment is to society. And so reaching disadvantaged children with high quality early care and education can pay back as much as $4 up to as much as $16 return to society.
So that got us involved in this issue as economists. During my time at the Fed, I eventually came to a community development and looked at early childhood and early care and education more from the perspective that we're talking about today-- where does child care sit in terms of workforce development, and what are the impacts on families and communities?
And so in terms of the conditions that are necessary to analyze this well, we've talked a lot about data. The data that was presented at the beginning of our session, by Kelly and Dan, provide us a picture of the type of information we can learn about and take a snapshot now, look at policies, what might happen to those policies in the future.
And then the second condition, I would say, is that one of the phrases that I heard today is that the business model for childcare is broken. Sometimes it's phrased as the childcare market is broken. But it provides this picture that we're analyzing an issue within a market context. And so it can be helpful to step back and just remember and refresh ourselves, what are those beneficial aspects of markets?
On the supply side, providers can design and offer the type of services that meets the type of demand and the type of preferences that families have. And then in that type of market, families have a variety of choices. And they can have choices, whether it's type-- center or family child care-- or the type of culture, language that's offered in those programs, or how they engage with children.
So these benefits to markets that I think are helpful to have in mind as we go to addressing the problems which we have-- we've talked about a bit, and I'll wait till the next question to just elaborate a little bit more. So I'll go to Seung.
SEUNG KIM: Excellent. So with that, I think it's worth just noting LISC also is a CDFI, a Community Development Financial Institution. And our mission really is around ensuring that neighborhoods are great places where people want to live, work, do business, raise their families.
And so when we think about the work that we do, which I believe we're probably best known for our work in affordable housing, the reality is when we're addressing community needs, we reach out to community and try to understand what the needs are. And actually what's been elevated, in addition to housing, are the areas of work that I work on, including economic opportunity, it's workforce development, asset building, small business, economic development, community health, sports, youth development, and, of course, early childcare and education, which we've been working on for over 20 years.
And like everything that we do at LISC, the work really is about supporting local initiatives. So it's engaging with community partners, with residents to try to understand and identify what the solutions are. It's acknowledging that, really, we have tremendous community assets on the ground, and if we can provide just a little bit of extra support.
In the early childcare and education space, we do this through childcare facilities, development planning. It's through childcare facilities financing solutions. It's organizational capacity building supports, technical assistance, which includes peer-learning opportunities, because we also recognize that we have experts on the ground who really know the work, and sometimes we're just making the connections. And so when I think about the work that we're trying to do, we're trying to develop the local systems, the ecosystems which provide all organizations, residents, childcare providers to really thrive in those environments.
JOAN BLOUGH: So let me just say a little bit more about the Child Care Innovation Fund and the Early Childhood Investment Corporation. So the Early Childhood Investment Corporation was created in 2005. We're a component unit of state government, but we're a nonprofit organization.
We serve the entire state of Michigan. Our mission is for all children and families in Michigan to thrive. And we define thriving in-- one of our most important moonshackles is around increasing access to affordable, highquality child care.
The current conditions in 2021, when we had the opportunity to get a seed investment of $3 million to start the fund from the WK Kellogg Foundation, was we had in Michigan-- and this still remains-- basically true today-about 50% of the actual childcare supply we need to serve children today. So the data that you were seeing earlier that was talking about getting back to pre-pandemic levels falls far short from the actual amount of childcare that is needed to be able to support not only continuing economic recovery, but actually economic thriving.
50% of the people that work in this field, the fine people that you've heard talked about here today, are dependent on public benefits because their wages are so low. It's extremely difficult to attract people to join a workforce when they cannot anticipate actually being able to support their own families and don't receive wages that are competitive, even for this low barrier to entry profession, which you also saw earlier today.
So there's another aspect that's true about the childcare workforce is that we have racialized wage gaps, and those have been persistent over the last 25 years in this industry. And we also have wage gaps for people that work with infants and toddlers versus preschoolers.
So the situation post-pandemic in 2021 was pretty dire. But we thought that we, by choosing to focus on working with regional and community partners to design, pilot, iterate, and scale innovations, that we would have an opportunity to use what we were learning to influence policy financing and the actual structure of the overall childcare system.
So the Child Care Innovation Fund uses really a systems lens to understand what kind of conditions are we trying to change on the ground. And I'm going to talk about the conditions that we're really targeting.
One of the things that we need to be able to support the kind of changes that are being talked about here is that we need to have shared mindsets. We need more people across sectors who value childcare and understand how important the workforce is and how important it is for us for economic development. Essentially, I say it's a math problem. You tell me how much economic development you want, and that tells you how much childcare you need to build and provide access to in your community.
So we need to build more people and more organizations, not only in Michigan, the seventh district across the United States, who understand and support childcare. We need to align goals and accountability for childcare beyond the early care and education sector. That's been the traditional responsible party has been those of us, like me, who've been in the field for over 35 years, we solve all our problems ourselves.
What we've been seeing in the investments we've been making with economic development and in the public workforce sector is that that's more powerful for us to be able to realize systemic-level change. For one thing, those sectors are far better resourced and often have actually more power in the system, more influence to change the conditions that are true around policies, practices, and operations.
Another key thing that we're really working on is building of cross-sector networks, alliances, pipelines, et cetera. Because you heard about the challenges of this one by one by one business development model. The economy of scale for childcare is actually about 350 children, according to available research. And when you think about a typical childcare center that you heard about that has less than 50 children, or a home-based child care that has 6 or 12 children, it's literally nearly impossible for people to be able to get profitable or to even be able to stay in business.
So we have a big focus on bringing individual childcare businesses. In particular, we have a project right now-we're bringing home-based businesses into staffed networks. And so a lot of the administrative burden that you heard about, the business backend, the business acumen, keeping full enrollment, collecting full fees, all the things that are fundamental to a successful childcare business happen through supportive extra layer of services above the individual business itself. And what we're seeing so far in this first year of the pilot is amazing results in terms of improvements in quality, improvements in more childcare folks getting licensed, and also more connection, improved wellness, et cetera.
And then finally, we really need to build human and financial capacity in the childcare system. You heard a lot of talk about professionalization. That's critically important. But people are not going to be driven to professionalize if their average wages are $12 to $14 an hour. So we can have high aspirations, but what we're trying to do in the Innovation Fund is to change the policies that better align with those aspirations so we can realize the fundamental outcomes that we all are talking about here today.
SUCHI SAXENA: Thanks so much, everyone. So it sounds like you're working at the systems level. There's lots of different conditions you're trying to create to serve different types of partners, whether that's a working parent, a childcare provider, a childcare worker.
And I just want to narrow the focus for a minute. Part of our interest in this work is really about ties back to our dual mandate around full employment. And so what is that policy solution, you think, that would be most helpful to a working parent, or a parent who's not working who wants to be working, but the lack of access to childcare is that biggest obstacle to them improving their workforce participation? Yeah, Rob, do you want to--
ROB GRUNEWALD: OK. So, yeah, it's interesting to isolate the aspect of the parental working. And I think what you-- parents working-- I think what you're hearing here is that the reliability of the childcare system is what allows parents to make that choice to work. It helps them to be productive at work. Some of the data that you saw earlier from Kelly showed you the impact when parents are not able to go to work because of childcare issues.
ReadyNation at the national level, and other surveys at the state level, have done representative surveys of parents about their experience with childcare problems. And, for example, does this cause you to miss work? Or do you reduce your hours? Or do you quit a job? Or do you get fired, actually?
And analysis from ReadyNation has-- from the survey of parents with infants and toddlers, shows that the impact on family income to families is $78 billion, to businesses, because they have trouble with turnover costs and also having to recruit, that's $23 billion, and then to government, due to a loss of revenue, that's $21 billion.
So solving that parental employment issue is very important, but it also sits right alongside the child development outcomes. So that you need a reliable system that allows parents to be able to go to work. But within the system itself is that we have a professionalized-- as has been talked about, professionalized early educators that are providing high-quality experiences for children, so that for disadvantaged children, especially, they are getting the type of experiences they need to come to school ready to learn.
And I would argue that quality and reliability go hand-in-hand, and that you need to look at the whole system and go for both of those goals in order to either get to the parent employment or to the child development goal. SUCHI SAXENA:So no easy--
ROB GRUNEWALD: Well--
SUCHI SAXENA: --one solution.
ROB GRUNEWALD: Yeah, I mean, what I would say, from a market standpoint, if we look at the checklist of where we see on the market perspective, on the demand side, we've already mentioned parents are early in their careers. They're earning less money. They're facing high family formation costs. So this is your main customer and they're constrained. Their budget is constrained.
On the supply side, we have the issues with the workforce, lack of access to capital. We have a lack of business training. And we have a regulatory burdensome system. So I think in terms of solutions, it's not a single solution. But I think-- and I'll address these as we go along in the conversation-- is innovations in addressing each of those aspects within the market, so we get to what is a well-functioning market.
And I'll give you just one analogy, is higher education and early care and education. They're different, but there are some similarities. Families can receive money to be able to send their kid to college or to send their child to childcare. Governments make direct payments into universities. They make direct payments, especially in the past few years, to childcare providers.
What I don't hear about the higher education system is that the higher education market is broken and that it's a relatively well-functioning market. They've got challenges, but that market is working relatively well. And I think that should be our goal for the childcare market.
SUCHI SAXENA: Thanks, Rob. Seung?
SEUNG KIM: Absolutely. I mean, I think it really does come down to simple math and thinking about the chart that we saw earlier around wages. We heard and we learned that the average cost of childcare in the Seventh District was just shy of $14,000, even higher in Illinois, in the Chicago area. And we also saw that childcare workers were only making something like $14 an hour.
But also, when we looked at some of the other sectors, whether it was in the service industry, retail, most of the communities that we're working with, it's not even about individuals being at the early phases of their career. There are so many American households across the country for whom $20 an hour is the reach. That's the goal.
You're earning $40,000 a year. Now you have to pay $14,000 to get one kid into childcare. Most of our families who we're serving have multiple children, and we haven't even figured out how to pay for our rent yet, let alone food.
And so I do think that it would be unthinkable for K through 12 education to not be funded publicly. It would be unthinkable if there was a state in this great nation that said they were not willing to do that, there would be trouble to pay, basically. And I don't know why it's any different when we're talking about the 0 to 5, 0 to 3, the younger population.
I think about-- I have the great fortune of living in a community north of the city. Only live there because my husband is a public high school math teacher. That school is about 4,500 students. Where are all those students coming from? At some point, they needed that early education. And fortunately, we live in an area where we do have access to great childcare. But that is not the case for most Americans.
And so I just want to walk it back also to say when I think about the role that LISC plays in this space, it's also to ensure not only that childcare is safe, that it's accessible to individuals, that we have top notch facilities and high-quality education that happens in those places, but that it's accessible to everybody in this nation.
SUCHI SAXENA: Thank you, Seung. Joan?
JOAN BLOUGH: I think I would maybe build off what both my colleagues talked about because I think there's also some nuances of the higher ed model in that there's a lot of different financing mechanisms for families, right? And those kind of financing mechanisms don't exist for early childhood.
I think, fundamentally, the Early Childhood Investment Corporation believes that childcare should be regarded as a public good. And getting to that being true is going to require a lot of changes. But we, essentially, have no rights for young children prior to school entry.Literally, same child, they're not yet 5-- day they turn 5, they have a right to a seat in a classroom, to a teacher, to a building, in many states now to breakfast and lunch at school, curriculum, afterschool, et cetera. Again, same child, age 4, 3, 2, 1-- why are we waiting until children are 5 to say that they're deserving of things?
Instead, we're creating an additional burden that hasn't been talked about for too many children, which is that they show up at school for kindergarten and they have undiagnosed health and developmental problems because they haven't been in a setting with highly qualified people to understand what they need. And any issues that they might have had from birth on, they haven't had an opportunity to have those addressed.
Childcare is one of the most powerful strategies we have in America to actually bring more equity and equality to children and families. And in particular with children, because childcare for most children is a more than eighthour day, that setting is a place where they can receive so much developmental health benefit, that denying children that access until they're 5 creates problems and expenditures. The special education burden in many states is very high. If we were investing earlier, we wouldn't be getting to that.
SUCHI SAXENA: That's a good segue into a question I have about-- very recently, there's been this tidal wave of federal dollars available to communities to support childcare access as a result of COVID-19 policy responses. Some of that money expired last year. Some of it is going to expire this year.
And I'm curious, just from what you've seen, how those policy responses, how that funding has been enacted on the ground. What can we learn from that, from this infusion of funding that's happened over the past couple of years? How did it help the situation? Are there things that were missed opportunities, or what would you have done differently?
ROB GRUNEWALD: Well, for the childcare-- so in terms of the American Rescue Plan, $24 billion allocated for childcare stabilization grants to support childcare providers during the really deep impact that the COVID-19 pandemic had on their business model. And also $15 billion-- I got my numbers right here-- supporting CCDF, the childcare subsidy system.
So all that money goes into the system. What's interesting about the childcare stabilization grants, it is an opportunity for states to make some direct payments to providers and to actually build some relationship with providers that they may not have had before. And then, as you heard in the earlier panel, too, is structuring those dollars in a way that helps to support that business model, to move it from broken to working much better.
So just to report out on what has been published by the Council of Economic Advisors at the White House is some research that looks at that period of the stabilization grants and analyzes in a way to make some comparisons of what may have happened if that money wasn't available. So some of their results are that after 18 months, the labor force participation rate with women with children under 5 is 3 percentage points higher than otherwise.
So let's go back to Kelly's data that we saw on that chart and we saw that bit of an increase in that participation rate. So the question would be, did those stabilization grants actually supporting the supply help create opportunities for mothers to go to work?
Their analysis also provides some evidence that wages for childcare workers were increased. The number of workers also increased, which is a proxy for supply. And then it helped to reduce the prices that were offered to parents by 10%. They also analyzed that point after which the money was no longer available, and they see some backsliding on those numbers.
So it's an interesting experiment. And I'll conclude there with that just high-level look. And maybe you could provide some more of what you saw on the ground.
SEUNG KIM: Yeah, absolutely. For LISC, we had the great fortune of deploying actually a significant amount of federal, state funds during the last few years. One area where I think dollars could have been deployed more intentionally in the childcare sector is, for example, PPP loans. The acronym's going to--
JOAN BLOUGH: Payment Program--
ROB Payment Program-GRUNEWALD:
SEUNG KIM: Protection. [LAUGHTER]
Everybody knows what it is, though. And so that's the important part. And the reality was, for a lot of childcare providers, it was not accessible. They didn't have the high enough level of revenues needed. They might not have had digital equity to be able to apply for those dollars. They might not have had the right credit score that they need to access those dollars.
And so I do think that there are some areas of federal funding where there could have been more intentionality around investing in and supporting this sector, given how important we realized, at the same time during the pandemic, this industry really is.
I'll also say that LISC, I mentioned, has been involved in investing in, through both loans and grants, in the childcare sector, both facilities and businesses, for 20 years. In the last 20 years, we've invested $150 million into this sector nationally. Half of that was deployed since 2022, in large part because of ARPA and other sources, which, again, we applaud just the government's ability and capacity to distribute through organizations like ours and by other means to get the dollars out there.
It happened so rapidly. It happened so quickly that it was just about getting the dollars out the door and not necessarily building up the infrastructure that we need to make sure that the dollars are getting to the right place, that it's being used well and done in a way that we're actually continuing to build upon the infrastructure that will support the industry longer term.
One positive aspect that we've seen is similar to places like in the state of Rhode island, where there has been state funding to support childcare for the last several decades, if not longer. We have seen that other states are starting to adopt this approach. And they're actually looking at it in a way where there's more time to deploy. There's also technical assistance that's involved. And so we're very hopeful about what the huge influx of cash has demonstrated is possible.
JOAN BLOUGH: You heard a little bit on the last panel about some of the policy decisions that Michigan made under the umbrella Caring for MI Future. So one of the things that was true about the ARPA childcare development block grant funds is states could choose to set aside a percentage of those funds to use at the state's discretion on a variety of things.
So for us in Michigan, that was a $100 million investment, just unprecedented in the industry. 50% of that, a little bit more, went to grants for facilities' renovations, which was desperately needed. And the rest of that funding was split among a number of projects, which really were determined through a stakeholder input process run by our early childhood agency in Michigan, you heard referred to before as MiLEAP.
I've had the good fortune at the Child Care Innovation Fund-- we won three of the projects under Caring for MI Future that we've been operating, and I think they've been important policy responses to some of the issues that have been talked about today. So a key priority for the Child Care Innovation Fund is to create more synergy between the economic development sector and the childcare sector. And we did that by investing in regional childcare planning coalitions that were either led or co-led by economic development organizations across the state of Michigan.
So, many great things have come out of that. But I would say one of the most important things that has come out of that is that it's a little bit like I had a V8-- could have had a V8 kind of a moment, where I now have economic development organizations saying to me, I've missed so many years when I could have actually been building the childcare supply that I needed if I would have understood what I could be doing.
And actually, I think it's even deeper than that. If they could have even seen the businesses as businesses, if they would have understood that childcare is an industry, they could have applied their expertise to it. I now have economic development organizations that are going through training from the Civitas organization, which teaches people how to run a successful-- financially successful childcare business. So from now on, economic development organizations are going to be doing that.
I've also been funding, through the Innovation Fund, the design and scale-out of early care and education registered apprenticeship. So this was a policy solution that took a tried and true way of helping people build skills, work, get paid at the same time, and brought it to the childcare industry, but through the public workforce sector. That, again, they could have had a V8 too, because guess what, their mission is also around employment, labor force participation. They never recognized childcare businesses as employers.
And so through this process, they're beginning to build relationships with childcare employers. They're understanding that they have a long-term interest in having enough access to childcare, so that when new manufacturing, new businesses come to their area, they can actually find childcare.
And then finally, we've been piloting a comprehensive network building strategy for home-based childcare businesses. We're currently funding nine hub organizations that provide backend business services, a professional learning community, training, quality supports for 22 networks of home-based childcare business owners serving almost 500 businesses in this pilot year.
And for the first time, we're working in the state with home-based childcare business owners who English is not their first language. So we provide access to these networks in Spanish, in Arabic, et cetera, so that we have culturally responsive childcare available to families, immigrant, and refugee families.
I'll just say a bit-- I think one of the biggest challenges with this funding was it all came at once, and it's incredibly time-limited. And the amount of it was so large that at least we heard from many legislators, the childcare problem has not been solved. How could it not be solved when we've just had all this money? And so that frame is out there. That's that mindset we have to shift. It's like people don't understand the scope and scale of the actual problem.
And I think that there are, as we've all been talking about, childcare is a complex problem, and the solutions have to be interrelated, and we have to have funding for more than three years to do that. We need decade-long sustained investment to shift the kind of conditions that are out there right now.
SUCHI SAXENA: Thanks. And I think borrowing a question from the earlier panel, is there specific research that you don't have that you wish you had, or data that you don't have that you wish you had, that would really support your work?
ROB I think as we look at the policies on both on the demand side and on the supply side, there's research that would GRUNEWALD: really help understand these questions. On the subsidy side, in terms of getting money to families so that they can-- that there's this family-directed payment to the provider that they choose is that we know that this-- other families would benefit than what we typically see in the childcare subsidy model.
So right now, around 175% to 200% of poverty, $50,000 to $60,000 per year for a family of four, that's about where a lot of states' threshold is. And recently Vermont, as of October, will now be at 575%. So that's $180,000 for a family of four.
And so understanding, as states like Vermont move their threshold higher, also New Mexico is up to 400% of the federal poverty line, what happens to that market? How do families respond to being eligible for this benefit? What happens to the demand, the supply, wages, and so on? I think that it's important that we look and take this opportunity to understand what happens when we make such a big shift in policy.
Some of the other research more on the supply side is understanding the credit constraint and the capital constraint that is in the industry. And some of this is being able to do some analysis so that we can bring CDFIs, like LISC and IFF and First Children's Finance, who really focuses on childcare. That these CDFIs can come in and help support an increase in capital.
And there's a role for banks to play in this, too. In considering the Community Reinvestment Act, under certain conditions, a participating bank, financially or providing some of their volunteering for some of their staff expertise to these issues, could help support what they need to do for their CRA obligations.
SUCHI SAXENA: Seung.
SEUNG KIM: So this is very niche, but I'd be curious to know what the facilities financing need is out there, both to create new facilities, but also to redevelop existing, just to see what that gap is.
JOAN BLOUGH: Well, I would say in the broader early childhood sector, we do not have most of the data we need to really
understand and grow this industry, unfortunately. I was very excited to hear about the work that our colleagues in Iowa are doing. I'm making a beeline for them at the reception following to better understand. But a key thing that we need is we need real-time enrollment data. We need real-time inflow and outflow data.So as we're doing supply building, are we plugging the dike or is it just in and out flow and nothing is increasing? We don't have that data right now. We talked earlier-- there was a lot of discussion about capacity and the difference between licensed capacity and actual choices around how enrolled you are. And in a lot of places, that is due to a variety of things. We need to better understand that.
So in some ways, I feel it's a fledgling industry that needs really-- in some ways, it needs to be able to be supported as other industries are, to have the data it needs to be able to inform families. It needs to be able to inform childcare business owners and employers. It needs to be able to inform communities. We have to be able to understand what's happening at the state level. And certainly we have to have data that can inform better national policy for childcare.
What we've learned in Michigan is while regional needs, there are subtle differences, the problems that are being experienced in childcare are experienced across our entire state. It is not as though any region in Michigan has solved their childcare problem.
SUCHI SAXENA: I'm curious, Joan, you're running a wages pilot-JOAN BLOUGH: Yes.
SUCHI SAXENA: --right now. And so what question are you trying to answer with that wages pilot?
JOAN BLOUGH: It's a very small pilot. What we're doing is we're testing a wage scale that was developed by TalentFirst, which is a CEO alliance in West Michigan. And the Early Childhood Investment Corporation partnered with them in the development of this wage scale.
So what we're doing is we're paying child care business owners the difference between what they are currently able to pay people with the financing they have from parents, et cetera, and what the wage scale says these folks should be paid. And I will tell you, it is double the amount-- double.
So these-- we are running this pilot for nine months, because that's all the funding we had to do it. We're working with childcare business owner and employer in Detroit, and we're working with another one in Northern Michigan. And probably no surprise to all of you, guess what, it's a lot easier to recruit people to work in childcare if they can earn a living wage. Guess what, people don't leave childcare if they're earning a living wage.
And also, the pilot has influenced working conditions, which is the second biggest reason why people leave childcare is that the working conditions-- I think people on the panel before talked about wellness, but also about being involved in shared decision-making, have paid time for planning, being treated like teachers are treated. The additional funding to the businesses has allowed them to do some of those things as well.
SUCHI SAXENA: Thank you so much. As we're coming up to the end, I wanted to be sure to check in with Austin and Governor Bowman and invite any closing questions you might want to offer or reflections.
AUDIENCE: Well, thanks, Suchi. We have heard so many incredibly great ideas about how we can see a future for sustainable childcare provision. But how do you think about that until we get to that state, how do you define success? Is that on a daily basis or a long-term basis? And how do we know when we get there?
ROB GRUNEWALD: I've defined my success as we get to a well-functioning market, which is addressing all of the different parts on the demand side and the supply side. One aspect of getting to that point of success is using data to show not just
where the problems are, but who is benefiting from these investments.So going back to just this notion that there are these public goods, there's public benefit, but yet there's these advantages to having a well-functioning market. So I'll say three things about that. And one is that it's not universally free, that we do have parents that are upper income, upper middle income who are paying. Why would I argue that it not be universally free? The system needs that money in order to make sure that we have the access and quality that we need.
The second group that's benefiting is business. And we're starting to get a sense of what that benefit looks like through Tri-Share. In Vermont, they're increasing their offerings, in terms of their subsidy offerings, through a payroll tax. That 75% of that payroll tax is going to be paid by employers. They essentially went to the state and said, tax us, we see the benefit. So drawing money from business.
And as we articulate more clearly, to all different types of government levels, that there is a huge societal return that we're missing. And so more money coming from government. So being able to address the strategies that we've listed out, on the demand side and the supply side, and bring the revenue in from those sectors that are benefiting, I think is very important.
AUDIENCE: I guess I was struck. Oh, did you-SEUNG KIM: Oh, go ahead.
AUDIENCE: I was struck by the-- we've been going through this period of we have the money, we could get back to where we were before COVID. And the sobering reminder, before COVID, it was terrible. There wasn't enough access even before. So as the COVID money runs out, is that ultimately a pessimistic message or what do we do with that?
JOAN BLOUGH: Yeah, well, I think what's happened in Michigan is that we've been fortunate enough that the state is going to invest in some of these innovations. For example, those regional coalitions I talked about, the state of Michigan is going to invest in those coalitions going forward because the benefit that they're realizing from them is so valuable. They're going to invest in those home-based childcare networks.
So I think one thing we have from states like Michigan who set up the COVID opportunity as a way to strengthen the system, to learn, and to make policy proof points, is then we were able to do the advocacy, education, policymaker work to get more investment. But we don't have any kind of shared investment related to or agreement on that related to, for example, childcare wages.
And the solution to increasing the availability of financing to be able to pay competitive wages for this low barrier to entry profession remains at the heart of this childcare problem. If you fix that thread, a lot of these other things would be able to be fixed.
SEUNG KIM: And I just also would add that those dollars and those demonstration projects shed a spotlight on these issues. I don't think we were having these conversations 3, 4, or 5 years ago. The fact that you're hosting this conversation again, thank you, because this really does elevate the need around childcare. And that goes from the worker perspective-- childcare worker perspective, from the low wage worker perspective, from the small business perspective, from the education perspective. It really brings this to center stage in a positive way.
And I do want to go back and just respond to the question, Governor Bowman, that you asked around what does success look like. In addition to conversations like these, because, again, I do think this really is getting us part of the way there, but just all of the other innovative projects that we heard about-- Elevate-- one other innovative project that I saw on a visit to Milwaukee. Our LISC Milwaukee office is involved heavily in affordable housing development.
The economic development organizations pulled together and said, what are the needs that we need to address to increase economic opportunity in the city of Milwaukee? Childcare was elevated. So the LISC office decided to work with some affordable housing developers. And actually, this is not necessarily for home-based childcare providers. That's where my mind first went. But it was actually for just the everyday childcare worker to be able to, on their wages, afford a home, to build wealth, to have assets.
I learned-- I mean, this is not sustainable, actually-- the cost of construction and labor is so high these days that they're planning on selling these homes to childcare workers below the cost of construction. But I still consider it successful because it's a demonstration of what's possible. It's a demonstration of how we can work together to support this critical industry.
SUCHI SAXENA: All right. Well, thank you so much. This was just a fabulous conversation. I could also just keep talking to you all day. But I really am grateful for all the expertise all of our panelists brought to this conversation this afternoon. It could not-- I learned so much. And it really is going to help shape and sharpen our work here at the Chicago Fed.
I also want to say thank you so much to the Chicago Fed events team, the administrative services team, for all the great work you did behind the scenes and helping stand this up today. And to thank all of you who are joining online. Have a great evening. Thanks to all of you in the room. Please let's continue the conversation at the reception just right outside. So thanks, everyone.
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